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31 Cards in this Set

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Return on Total Assets(ROA)

Net Income/ Total Assets; Profit Margin*Total Asset Turnover; ratio of net income to total assets

Return on Common Equity(ROE)

Net income/Common Equity; The ratio of net income to common equity; measures the rate of return on common stockholders' investment.

Profit Margin; Net Profit Margin(NPM)

Net income/Sales; measures net income per dollar of sales and is calculated by dividing net income by sales.

Total Asset Turnover Ratio(TAT)

Sales/Total Assets; Return on Total Assets/Profit Margin

Equity Multiplier(EM)

Total Assets/Common Equity; ROE/ROA

Book Value per share

Common Equity/Shares outstanding



Market/Book(M/B) Ratio



Market price per share/Book value per share; Ratio of a stock's market price to its book value.

Price Earnings(P/E) Ratio

Price per share/Earnings per share; ratio of price per share to earnings per share ; shows the dollar amounts investors will pay for 1 dollar of current earnings

Earnings Per Share

Net Income-Dividends on Preferred Stock/Average Outstanding Shares

Total Debt to Total Capital(Debt Ratio)

Total Debt/Total Capital= Total Debt/Total Debt+Equity

Current Ratio


Current Assets/ Current Liabilities; Indicates the extend to which current liabilities are covered by those assets expected to be converted to cash in the near future.

Quick Ratio

Current Assets-Inventories/Current Liabilities

Basic Earning Power(BEP)

EBIT/Total Assets; This ratio indicates the ability of the firm's assets to generate operating income.

Total Debt to Asset Ratio

Total Liabilities/ Total Assets

Inventory Turnover Ratio

Sales/Inventories

Days Sales Outstanding(DSO) ratio

Receivables


_________________


Annual Sales/365; Indicates the length of time the firm must wait after making a sale before it receives cash

Window Dressing Techniques

Techniques employed by firms to make their financial statements look better than they really are.

Trend Analysis

An analysis of a firm's financial ratios over time; used to estimate the likelihood of improvement or deterioration in its financial condition.

Benchmarking

The process of comparing a particular company with a subset of top competitors in their industry.

DuPoint Equation

A formula that shows the ROE can be found as a product of NPM, TAT, and the EM. It shows the relationship among asset management, debt management, and profitability ratios.

Market Value Ratios

Ratios that relate a firm's stock price to its earnings and book value per share.

Return on Invested Capital(ROIC)

EBIT(1-T)/ Total Invested Capital;


The ratio of AT operating income to total invested capital; measures the total return that the company has provided for investors.

Operating Margin

EBIT/Sales; Measures operating income, or EBIT, per dollar of sales

Profitability ratios

A group of ratios that show the combined effects of liquidity, asset management, and debt on operating results.

Times Interest Earned(TIE) Ratio

EBIT/Interest Charges; ratio of EBIT to interest charges; a measure of a firm's ability to meet its annual interest payments.

Total debt to Total Capital

Total Debt/Total Capital= Total Debt/ Total Debt+Equity; ratio of total debt to total capital

Debt Management Ratios

A set of ratios that measure how effectively a firm manages its debts.

Fixed Assets Turnover Ratio

Sales/Net Fixed Assets; measures how effectively a firm uses its plant assets

Asset Management Ratios

A set of ratios that measure how effectively a firm is managing its assets.

Liquidity Ratios

Ratios that shows the current relationships between a firm's cash and other current assets to its current liabilities.

Liquid Asset

An asset that can be converted to cash quickly without having to reduce the asset's price very much.